Reduced VAT rate on Utilities for Charities and Not-for-Profits
VAT Reduction and CCL Exemption for Charities and Non-Profits
Reduced VAT rate on Utilities for Charities and Not-for-Profits
There are potentially thousands of Charities and Not-for-Profit organisations all across the UK that are paying too much for their energy bills. Energy suppliers usually treat charities like small businesses when it comes to energy bills, but wrongly so. Unlike small businesses, charities are entitled to certain discounts on their energy bills.
VAT Reduction and CCL Exemption for Charities and Non-Profits
Charities and non-profit organisations are entitled to a VAT reduction, from 20% down to 5%, on energy used for ‘non-business’ purposes, as well as exemption from the Climate Change Levy (CCL)*. Unfortunately, suppliers do not automatically apply these discounts where relevant, and so many UK charities end up paying significantly more than they should for their energy.
A recent study showed that over a third (37%) of charities did not know they could claim a reduced rate of VAT and CCL exemption, and even more (74%) were unaware that rebates for overpayments can be claimed as far back as 4 years. The good news is that it’s not too late to take action.
Does your organisation qualify for the Charity VAT discount?
All of the following organisations may be eligible for reduced VAT and CCL exemption:
- Charities (registered or unregistered) Non-profit organisations
- Village halls, sports clubs, community centres, etc.
- Free schools and academies, museums
- Care homes
- Businesses using less than 4,397 kWh/month of gas or 1,000 kWh/month of electricity.
What is the Climate Change Levy (CCL)?
CCL acts as a Carbon Tax and is applied to businesses and other organisations in the industrial, public services, commercial and agricultural sectors, and is charged on gas and electricity.
They are designed to encourage your business to operate in a more environmentally friendly way. CCL used not to be charged on renewable energy supplies, but since 2015 it is charged on all energy.
It is applied to your energy bill and collected via your supplier on behalf of the UK Government.
As a charity, or not-for-profit, it is likely that you are exempt from CCL, although this will depend on your VAT status.
CCL is charged at different rates for gas and electricity and can add significantly to your energy bills. As a charity, if you are not claiming a VAT reduction, you should check to see if you qualify.
The EAG have successfully assisted members to obtain CCL refunds for incorrect billing. If you are not currently claiming CCL exemption, or being over charged, please contact us.
How can charities apply for the discount?
Those eligible for exemptions or rebates will need to fill out a VAT Declaration form, which can be obtained from their suppliers. Upon receiving a VAT Declaration form, suppliers usually take around 14 days to review the application.
The EAG can work with your supplier to make sure you are placed in the correct VAT and Climate Change Levy rates, and ensure you are paid any refund due to you.
Mixed use
Where there is a mix of activities, some of which meet the government’s criteria for domestic or charitable non-business use and some which do not, you will need to estimate the split between qualifying and non-qualifying use, for each individual meter, in order to submit the appropriate VAT declaration.
Your estimate can be based on any method that is ‘fair and reasonable’, such as rating of appliances, annual consumption, or square footage. Charities can use their annual accounts to estimate the split between ‘non-business’ funding and ‘business’ income.
Energy Suppliers
It isn’t the responsibility of energy suppliers to facilitate VAT reductions and it is often overlooked, unless you inform the supplier in advance. A recent study showed that 36% of charities were unaware of these potential reductions and exemptions.
The reduced rate VAT won’t be applied automatically to your bills, so you will need to let your supplier know, and they will supply you with the corrects forms. If you need help, please contact us.
Nevertheless, even after notifying a supplier, the exemptions can be ignored, and charities are frequently overcharged on items such as VAT and climate change levy.
If you think you have been misbilled for an extended time you can claim back up to 4 years of overpayments.
Do you need help?
We see consistent billing errors and we have helped many organisations obtain refunds in the tens of thousands of £’s.
VAT Charitable Exemption Rules on gas and electricity:
- Where there is 60% or more qualifying use (either domestic or charitable non-business), the whole of the supply is excluded from CCL. Your Customer Declaration Certificate should, however, reflect your best estimate of the actual percentage of qualifying use for each meter as, under HMRC guidelines. Be specific in your wording, vague phrases such as ‘over 60%, therefore 100%’ - or similar – will normally be returned by the supplier for further clarification.
- Where there is between 1-59% qualifying use (either domestic or charitable non-business), that part of the supply will be charged at the reduced rate of VAT and will automatically be excluded from CCL. The non-qualifying use will be subject to VAT and CCL at the appropriate business /non-domestic rate.
- Where there are varying percentages of qualifying use on different meters (for example, one meter with 30% qualifying use and another with 70%), the qualifying element for each will be charged at the reduced rate of VAT and automatically excluded from CCL. The non-qualifying use on each will be subject to VAT and CCL at the appropriate business / non- domestic rate.
For any advice or help, get in touch, and we will help confirm your eligibility. We can also process your application for VAT reduction and CCL exemption with your supplier.
Which organisations qualify for CCL exemption and reduced VAT?
Do you think you may qualify for the reduced VAT rate but aren’t sure?
The list below can be used for guidance, but you should seek advice if you are not sure. Our experts at the EAG will help you.
Health and Wellbeing Charities
- Hospices
- Patient and Family Support Charities
- Children’s Charities
- Elderly Care Charities
- Disease & Disorder Charities
- Medical Services & Treatment
- Medical Research Charities
- Carer Support Charities
Animal Charities
- Wildlife Conservation Organisations
- Pet and Animal Welfare Organisations
- Hunting & Fishing Conservation Groups
- Zoos and Aquariums
Arts & Culture Charities
- Museums & Art Galleries
- Historic Buildings
- Performing Arts
- Libraries & Historical Societies
- Public Broadcasting and Media
Education Charities
- Nurseries
- Academies
- Universities and Colleges
Environmental Charities
- Environmental Conservation & Protection
- Parks and Nature Centres
Sports & Recreational Clubs
If you run a Sports & Recreational group on behalf of the local community and feel you may qualify for VAT reduction, but do not see your organisation type on the list below, then please arrange a call to our support team today.
- Sports Clubs
- Community Fitness Centres
- Arts & Crafts Club
- Community Gyms
- Women’s Institute
- Bowling Clubs
- Drama Clubs
- Freemasons
- Singing & Choir Clubs
- Scout & Girlguiding
Community Centres & Hubs
If you run an organisation on behalf of your local community and think you may be eligible but do not see your organisation type on the list below, then please arrange a call to our support team today.
- Leisure Centres
- Village Hall
- Youth Clubs
- Community Centre
- Community Cooperatives
- Free school or academy
- Libraries
- Care home
- Religious Groups
- Student accommodation
- Community Focused Groups
- Monastery / Nunnery
- Churches Free school or academy
- Housing and Homeless
- Other Non-profit